Hey everyone! It’s Austin Solomon with The Solomon Group at Coldwell Banker. Today we’re talking about Zestimates! Z-estimates – the term that Zillow uses to estimate the value of a home!
This is something that is common. We encounter this as agents a lot with sellers and buyers as a metric or a way to come up with a home’s value and I just wanted to talk a little bit about that here today.
A couple of things – how is a Zesimate calculated? Well, it’s a formula and so what Zillow does is they scrub a bunch of data (that’s public). For example, the last sale price, the date of that sale, specs on the home based on municipal assessor sites, county land records to obtain acreage, lot sizes, etc. and then obviously Zillow is a big hub that records sales prices of homes surrounding areas. Then what it can do, as it obviously stores all this data, it can draw conclusions and look at observations of sales in comparable neighborhoods to approximate values.
So, that’s Zillow’s way with coming up for an approximate value for your home. And a lot of times buyers and sellers like to reference their Zestimate, which is fine. That’s a quick and easy way to have an approximation of the value.
The point of the episode today is to bring to light how it’s calculated, what are some of the pitfalls of it and how it’s appropriately used.
I was thinking about it this morning and I have actually never used a Zestimate as a reference point to figure out a home’s value, it’s just not part of my routine in figuring out what a home would sell for or what a home is worth because of some of these reasons I’m going to explain. Not that I’m smarter than Zillow, there are some pieces I’m going to bring to light here.
#1 When can Zesimates go wrong? Well the biggest thing is that Zillow does not know how well a home is maintained and it doesn’t know if a home has updates or not. So that may be backed-up by the Zesimate. Now, one of the data pieces that Zillow does scrub would be the assessment or the tax assessed value and so if the assessment was updated, let’s say you updated your kitchen and the assessor redid their assessment, then it may be accurate. Oftentimes, if it wasn’t, then Zillow doesn’t know if your kitchen was updated. So, updates to flooring, fixtures, landscaping, etc. things that… updates that homeowners would do aren’t always reflected in the assessment or the Zestimate.
#2 Another piece to keep in mind, is there can be data errors. They are scrubbing big data from many places and sometimes we can see inaccurate data that can skew the Zestimate. Zillow may not have accurate information about the square footage or potentially the sale price of the property was not entered properly you know ‘way back when’ etc. which can skew the data.
#3 Zillow doesn’t know how the home feels, how the home smells, how the layout is, is it functional, is it not, it doesn’t know what is next door – all the intangibles of the property, Zillow can’t factor those things in.
That’s where a Realtor comes in to estimate what a ready, willing and able buyer will pay for this property given all the factors.
So, how do you a Zesimate? It’s a great starting point to figure out just a ballpark of what range the home may be in. Just like we’ll reference the tax assessed value or fair market value, it’s a good observation, it’s a good talking point. It’s not something that’s conclusive. If Zillow says it’s worth $150K, that doesn’t necessarily mean it’s worth $150K.
That’s where again, consulting a Realtor for the market value is the best value or an appraisal, something more detailed that’s going to be more specific to your home.
As a buyer, if you’re shopping on Zillow and you see that. It’s not a bad thing just to reference, if that Zestimate is significantly higher or lower then what the property is listed for or what you’re paying for the home. It might not be a bad idea to say, “I wonder why, why is this assessment so low or high?”. It’s a good talking point.
One other thing, or another observation about the Zestimate, that I’ve seen is – as soon as property is listed, I’ve noticed that the Zesimate changes too.
Let me give you an example, the Zestimate on a home is $180K and all of a sudden it’s listed at $199K. Quickly the Zestimate changes to be closer to that asking price. A lot of the times that Zestimate mirrors that asking price of the home, once the property is listed. So that value can change a lot of the time when it’s listed or they update their formula, etc.
There you go! That’s what we’re talking about today! I wouldn’t use that as the conclusive way to come up with a home’s value. Again, consult with your agent so you have the proper education on the home’s value.
Alright, thanks for listening to this week’s episode of the show!
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Austin Solomon | The Solomon Group – Coldwell Banker Action – (715) 212-4693